Bank nifty crossed previous high and making new highs every day.
Does Bank nifty overvalued?
When we see the other sectors like
1) IT - affected due to high Attrition rate and US economy contraction ( due to FED aggressively hiked the interest rates )
2) FMCG - affected due to inflation. So for safeguarding their profit margin, all the FMCG companies hiked their product price which leads to lower the sales.
3) STEEL - affected due to taxation by government for export
4) OIL & GAS - affected due to taxation by government for export
5) Other sectors excluding IT and banks affected due to increase in "Crude oil price"
But when you see the banking sector, majority of the banks declared better than expected results.
How ?
Let's start from first
Well RBI increased the repo rates, So all the banks increased their lending rates on the very next day of the rate hike announcement but not their Fixed deposit rates.
Banks slowly increased their FD rates to attract new customers and sustain their existing customers when compared to lending rates, so that their profit margin will not get affected.
But slowly Quarter on quarter their FD rates increased, the effect of this will impact on next 3 quarterly results. ( Chance of contraction in profit margin)
Say for example last quarter SBI FD rate is 6%, but now they increased it to 7%, so they need to pay extra interest which affect their profit margin.
As we see all the banks hitting all time high now, it may have a high chance of correcting in near future.
So my advice is currently don't invest lumpsum amount in banking sector stocks. Let's give sometime to correct and we can invest at somewhat low levels.
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